GBP/USD retreats from 1.3080 as DXY weakens amid improvement in the risk appetite

• GBP/USD has found bids near 1.3080 as the risk-aversion theme loses appeal.
• Higher UK’s CPI advocates for a fourth interest rate hike in a row.
• Going forward, US NFP and UK’s GDP will be keenly watched.

The GBP/USD pair has attracted some significant bids near 1.3080 as the risk appetite of investors improves and risk-perceived assets are gaining more demand. Earlier, the cable was underperforming despite tightening monetary policy from the Bank of England (BOE).

The BOE has increased its interest rates to 0.75% to combat the soaring inflation. The central bank raised its benchmark rates three times in a row, each time by 25 basis points (bps). Adding to that, the UK’s Office for National Statistics printed the yearly Consumer Price Index (CPI) at 6.2%, which was significantly higher than the market estimates and previous figures of 5.9% and 5.5% respectively. A likely higher print of UK inflation may force the BOE to come forward with one more interest rate hike in May.

The US dollar index (DXY) has faced barricades after failing to record a fresh nine-month high and is on the verge of slipping below 99.00. An improvement in the risk-appetite post the absence of three core demands of Moscow: denazification, demilitarisation, and legal protection for the Russian language in Ukraine have hammered the DXY near 99.30. Meanwhile, the 10-year US Treasury Yields is hovering around 2.46% ahead of the US Nonfarm Payrolls (NFP), which are to be unfolded on Friday. A preliminary estimate of US NFP at 475K signals a significant reduction against the previous print of 678K.

Apart from the US NFP, investors will also focus on the quarterly and yearly UK Gross Domestic Product (GDP) numbers, which will be released on Thursday.  The quarterly and yearly GDP numbers are likely to land at 1% and 6.5% respectively.